What's happening in the Housing Construction Industry these days? Not much! “One Time Close” Custom Perm Loans to the Rescue!

So what does a homeowner seeking a custom home do these days? You get your own financing and let your financing bank manage the process for maximum results!

OTC or Custom Perm is two step loan consisting of construction (term) and permanent financing (perm) combined into one transaction.

This allows you to reduce your expenses to one set of costs usually associated with two closings. Until recently, it was more common for your builder to obtain construction or interim financing to build the home and then market it. Since so many builders found they could not sell their homes in a declining market, very few builders are proceeding using this model as banks have been forced to reorient how they handle construction projects.

What about Spec Loans?
Spec loans as they are called are pretty much dead in this market. In fact, many lenders who previously funded Spec or Construction loans have gotten out of the business altogether. Previously, when a home was complete, you, the home buyer, paid the builder with a permanent end loan. In this scenario, the price you paid included the builders profit and their cost of doing business while building your home.

While some builders will try to get this form of financing for 'their own home' banks have seen through this and are unlikely to fund a builder unless they are very solid financially indeed! Better for them and you to have a firm contract from the start and nail down the total project up front so there are no surprises. The great thing about building your own home is really having a hand in the design stage to final outcome and knowing the quality of construction from the ground up. Using the OTC (One Time Close) program, you first get qualified for financing for the total 'as built cost to build the home. We use your builder's budget to determine the final cost, including any acquisition land. The OTC loan is closed prior to the start of construction. 

Usually, your permanent house payments will not begin until the construction is complete or you can choose to pay interest only during construction.

How does it work?
The loan is essentially a set aside of funds available while the house is being built. Your builder will receive construction draws during the process upon monthly inspection of what is completed. This helps you and your builder stay on task. As the construction draws are taken, the borrower will pay interest-only payments on these outstanding funds (or this interest can be funded into the loan).

Once the construction is complete and the loan is 100% funded, your permanent terms (which you established prior to starting) will modify so you have a traditional mortgage. OTC or Custom Perm can really save homeowner during the building process if it is managed correctly. This also saves your builder from having to qualify for the loan and extend their own credit. Most banks prefer this process as you, the homeowner are carrying the risk long term.

Where can you get an OTC?
Find a specialist OTC custom perm lender or mortgage banker who handles these products and knows what they are doing. Any construction lender worth their salt will have a dedicated and highly experienced underwriting and construction management team to make sure you get the house you paid for!

Enjoy the journey! loannetter

Grab a Bag of GREEN: Energy Tax Credits!

Home Energy Tax Credits Pay Back 30% of Your Expense!

New higher Green Tax Credits apply to energy efficient improvements made to your home after February 17, 2009.


For example: If you invest $1,000 on better insulation or a high efficiency furnace for your home, this new law will return $300 in as a tax credit or 30% of what you spend. The total allowable is now $1,500, up from $500, under the old law. The products you install must be more energy efficient than what your are replacing or be certified. Check the product list at http://www.irs.gov . Look for the Energy Star label.


Alternative Energy Equipment Credit
For new alternative energy sources like geothermal heat pumps, solar energy generation or wind turbines, as long as these items are qualified as such and attached to you home, you can get the 30% tax credit with no dollar limit on these items.


Team up with an EEM = Energy Efficient Mortgage
EEM's have been around since the sixties. They let you borrow up to 5% (more than you would normally qualify for) to make energy efficient energy improvements to your new or existing home (county limits apply). By making these improvements before the end of 2010, you will also get the 30% tax Credit. Sweet!


How do you get an EEM?
A HUD certified FHA, VA, USDA or conventional lender can advise you on how to qualify and walk you through the steps to get your project approved and funded, whether a purchase or a refinance. Not all lenders offer EEM's. If you are buying a foreclosed or distressed property that needs some TLC (broken windows, missing furnace) this could be the ticket to getting your loan funded AND improving your home. I'd be happy to help!


Great Nesting Incentives!
With loan rates so low, and many builders low on work, now is the perfect time to go for a modest renovation or full scale addition and reap the benefit of tax credits. Energy improvments will also cut your energy bills by up to 50% while improving the comfort and health of your home for many years. Building materials and labor rates are very competitively priced and contractors are easier to schedule.
For many people who might want to 'move up' but can't sell their home in this market profitably, the addition of some great closet organizers, new flooring and better windows or kitchen appliances could make life a lot more comfortable while raising your home's value.


Think of it: you are improving your home value and employing local people which improves our tax base; while being credited back 30% of your energy improvements!


Plug and Drive Cars
If you purchase an Electric Vehicle during 2009-2011, and it has 4 wheels and weighs less than 14,000 pounds you could get a tax credit between $2,500 and $7,500, depending on the battery capacity/recharge factor. The new law applies to plug-in electric drive conversion kits. The credit is equal to 10 percent of the cost of converting your vehicle to a qualified electric plug in motor, up to $4,000.


Business Renewable Energy Grants
Business owners may apply for a grant or a renewable energy production tax credit for energy production facilties. If construction begins in 2009 or 2010, the grant can be claimed for energy investment credit property placed in service through 2016. You may be credited up to 30 % of your investment! The property must be placed in service before 2014 (2013 for wind facilities).
A rural homeowner with a year round stream, could, for example, build a micro hydro energy plant as a business and literally watch the money roll in by selling killowats back to your power company. How about a wind farm amongst your raspberries? Might scare off the crows!
For more on appliances, windows and lighting: EnergyStar Web Site

Happy Saving! loannetter
© copyright 2010 susan templeton loannetter

Existing Home Tax Credit: 30% of cost up to $1,500, Expires: December 31, 2010; Must be an existing home & your principal residence. New construction and rentals do not qualify.

Alternative Energy Tax Credit: 30% of cost with no upper limit, Expires: December 31, 2016; Existing homes & new construction qualify. Both principal residences and second homes qualify. Rentals do not qualify.
Source: IRS http://www.irs.gov/newsroom/article/0,,id=206875,00.html   Source: http://www.hud.gov/offices/hsg/sfh/eem/energy-r.cfm

It's EASY Going Green!

Earlier this year Congress extended solar and alternative energy tax credits to take a bite out of the bill of upgrading your home energy systems. In addition, the EEM or Energy Efficient Mortgage is the new rage among borrowers needing up to 5% of your home's value to make energy efficient improvements..*

Since when is energy from the sun considered 'alternative'? Isn't the sun our main method of heating the earth? Even primitive adobe housebuilders and cave dwellers knew which way to face their walls for maximum solar gain.

The new 'alternative energy' credits mean that our federal government is providing a $2,000 credit paid to the builder on new homes whose space heating and cooling energy consumption is 50% below the annual consumption a standard home.

Ask your accountant to research your rebates! Heck one guy I know has an entirely 'alternative' net zero home and it's not the first one he has built so these are not new ideas folks. They are ideas whose time has come when we are looking around at the folly of ripping minerals out of the earth at great expense so we can send ships full of the stuff spilling their way to some refinery so another train or truck can haul it and at the end we get to pay three times what it actually cost to produce. Perhaps the new transparency is finally arriving just in time to start making sense. Like about the time we can't afford our gas bills this winter...that would be a good time. If you are like many of us seeing 50% higher energy costs, this tax credit is the perfect tipping point: Alternative thinkers are no longer the oddballs...they are the ones with real jobs climbing on roofs installing new solar collectors taking advantage of our new found enthusiasm for doing the right thing!


Energy Audits: If you plan to install a solar photo voltaic energy system, better windows, upgrades to insulation or other green features, you will need a home energy audit to verify the improvements are worth the effort. A HERS Audit is performed (approx $750 cost of which a portion is credited back in your EEM). Certified inspectors use techniques like infrared thermography and blower doors to test the energy efficiency of your home. These systems checks are part of LEED gold and BuiltGreen 4 star home certifications and are increasingly used by renovation specialists.

In some cases the product manufacturer can provide statistics of before and after savings to satisfy the underwriter's guidelines on yearly savings. Double or or triple pane windows and low-e glass are a no brainer in colder climates. One borrower installed a pellet stove to replace an older wood stove. The pellet stove manufacturer provided statistics comparing the savings of using a recycled easily sourced product and the heat btu gain plus dollar savings. Very convincing!

The bottom line is that your energy improvements must net dollar savings over time. Lenders appreciate that you will be paying less for energy going up in smoke, literally, and give you some credit toward a higher mortgage payment.

Who Can Help? Call your local Building Planning Department may refer professionals in the area. Contact your local chapter of American Institute of Architects or Building Designers. Seek out professionals in local building trades groups. City planners, universities and other business networks and sustainability groups may refer members who are experienced in these technologies. There's always Google!

Get a leg up on the renovation boom! Many folks are staying put and making lifestyle and health changes including improvements to their homes to allow aging in place...all good! Factoid: Most so called 'green loans' are a public relations ploy to get you in the door and the lender doesn't even know about EEM's and may not have a specialist construction department--borrower beware!


Get the Real Deal! Your green project needs to realize more than good intentions. Invest in a designer or architect and builder who are certified under a green program. The two most recognized programs are: Built Green, rated by stars and LEED rated as silver, gold or platinum.

Built Green is run by our local BIA chapter: http://www.biawc.com There are other programs in other regions.

LEED for Homes is managed by the US Green Building Council. http://www.usgbc.org this program was originally developed by commercial architects and has the most rigorous testing.

So remember the new mantra of our times: Green is Good!

Happy greening! Loannetter

© copyright 2009 susan templeton loannetter 
*source http://www.hud.gov/offices/hsg/sfh/eem/energy-r.dfm 

PERFECT Time to Build Your Home!

What, are we crazy to suggest such a thing? Nope. Actually, like a good market contrarian, we can list a few very solid business reasons to build NOW.

1. Architects and Home Designers are either totally slammed working on major renovations for their top clients who may have decided to stay put or age in place... or extremely grateful for a nice plum ground up custom design to work on.
2. Builders are largely under-employed right now, so you will enjoy a choice of builders who are more willing negotiate your price and expect fantastic service.
3. Borrowers with high credit scores (720 or better) and sufficient assets to back up their project will have banks falling all over themselves to assist a custom project.
4. Builders can forget funding their own spec or custom homes (unless their client is taking on the financial risk) so you, Mr or Ms. Borrower will have all kinds of respect and control of your custom project coming your way.
5. Land values have plummeted due to the lack of developers able to fund construction projects so you will have more choice of lots going for rock bottom prices.
6. Materials costs are down for sheeting products, i.e., OSB board, plywood and other locally accessed products due to lesser demand.
7. Subcontractor labor costs are lower: $3.50 per square foot to frame a custom home now down from $6.50 psf last year (local source our region).
8. Green technologies are enjoying some very cool stimulus energy tax credits for solar and other alternative energy systems, so you can add some hot new upgrades to your home for great energy savings and better quality of life.
9. Energy efficient appliances are also enjoying local rebates from the appliance manufacturers as well as your local Public Utilities companies.
10. Better lighting design, including super efficient LED products are coming on the market that present huge energy and health benefits over current high efficiency models.

Whats not to like about all these advantages to building your home the way you want it for less $ per square foot? Just don't wait for the next wave of contrarians who can't find a nice spec home with all the perks of custom homes to get the message!

Happy custom building! Loannetter

© copyright 2009 susan templeton loannetter

Green is UnGreed!

"The greed that led the world economy into crisis will not defeat our commitment to good work." Rick Fedrizzi

This quote came in a letter from the the CEO of the US Green Building Council, Rick Fedrizzi, offering the hope for homeowners and those in the green building industry who are concerned about the viability of our Green Movement during tough economic times. With everyone questioning the viability of the housing market in general, he reminds us that good is always valued. In fact, when you come right down to it, good equals value. We tend to choose better things that last longer and forego short term gratification when the dollars really matter.

He reminds us that we cannot wait for change to be effected by our legislators, our bankers, our employers or our mentors. It's up to us to create these positive changes for ourselves. By voting for officials we can support and then NOT just leaving it up to them but to get to work behind them and speak about, write about, blog about and take our need for positive change into the center of our real lives.

Change is hard. Not changing and waiting for things to get better is harder. We can create our own agenda, our own thinking, our own actions, as ultimately our abundance and our freedom!

Good ideas, and good trends eventually do take hold once proven. I posted a basic green blog on a real estate interactive site a while back and there were very few comments. Since then, I've helped initiate more discussion on these values in my circle of influence, attended several Green Living and Building Expos, taught a Green Mortgages workshop, participated in a Green Home Bus Tour, visited a couple of New Green Home and Renovation Open Houses, started foward planning for a Better Living (shades of green) seminar, and been party to a conversation on LEED and local Health Inititaves with my local officals and University. I have been speaking with more clients who are interested in building smaller better, greener homes. The conversation with banks (fewer, leaner) about ways to fund these projects is an open dialogue...we aren't there yet but with the 2009 Housing Bill I am pushing hard for updates to the traditional Energy Efficient Mortgage including air quality, more dollars and ways toincorporate the Alternative Energy Tax Credits. This trend is certainly catching fire and is NOT a trend we will see reversed any time soon (while there is breath in my body!)

Good news catches on for a reason: In recent months, I have witnessed a number of great new technologies and models coming to the fore. Given that the 2008 Congress Bailout Bill did include some tax credit extentions for solar and alternative energy --that very fact may help folks with their acceptance levels. Trends I have witnessed coming online locally include prefab modular home companies, new alternative energy products, new publications and networks supporting green concepts in various forms. The sheer enthusiasm for things green is contagious. It's gaining momentum. As better home and lifestyle trends become more the norm, these concepts are gaining acceptance with appraisers, realtors, underwriters, and lenders. Perhaps because green choices make both economic, social and environmental sense!

The upshot of all this for homeowners who are building or renovatiing and want to do a better job is more choice and more options with more willing participants. So remember the new mantra of our times: Green is Good!

Catch the wave! Loannetter

For more on green building http://www.usgbc.org

Renovators Celebrate Summer!

RENOVATION SEASON IS HERE!

Summer FIXUP Season has arrived! Need a new roof, paint, landscaping, updated appliances or more? Many folks are staying put and fixing up rather than moving up these days-- in line with more sustainable values.

Look Before You Leap!
Many builders specialize in renovations so check around. Ask to see examples of their work and interview their clients...you want to know a contractor respects your family during the process! An architect or home designer can help you see your way through the planning phase and if needed, oversee the process for you. Some design centers offer a great range of one stop shopping for things like flooring and cabinetry and their sales staff can specify their products. However, this does steer you to a particular product range so you may benefit from the help of a consultant who will bring you samples for your specific needs.

Does Size Really Matter?
Before you blow up your house to enormous proportions ask yourself: how much space do you really need? Consider multiple use spaces, i.e., a family room with built in study zones. An extra closet with great shelving means your kids can put toys away rather than need that extra room to mess up. Better lighting or furniture is always a great way to freshen up your lifestyle.

As always: Get your building permits! Any renovation, whether you do it yourself or hire a contractor without a permit means the addition cannot be legally valued. The small addition of property taxes paid on your extra space or improvements will more than compensate for your home being sellable later on!

A Loan or a Line?
We offer a range or Equity loans and Lines for quick fixes. Renovation Loans work for 6 month terms on bigger projects. We offer all renovation programs including FHA Rehab loans which can help you buy and get rehabilitation funds at the same time.

Hint: Don't fall into the DIY trap, run up your Home Depot card, extend yourself with contractors all over town and kill your credit score!

Some lenders offer Bridge Loans for quick funds (3 months minimum) and high interest rates if you are into buying and flipping. Word of caution: beware the prepayment penalty...and have an exit strategy you can live with! The cost of doing business as a buy and sell renovator is worth finding a lender who is a) real and b) has funds to complete the contract. Most bridge funds to build or renovate include a decent funded contingency fee, no payments during the term, charge 5 points plus up front for their trouble AND (the best part) perform their obligations without quibbling.

Check out Dwell magazine this month: Renovate It! Modern Homes With Old Bones www.dwell.com

Contact Loannetter for your Free Construction Survival Kit. Our budget sheet can assist your Renovation or Custom Build project. A tight budget it the key to a happy end result for everyone concerned!

Stated Loans Still Around!
Great credit equals more trust and less documentation. With 740+ FICO scores we offer several stated income programs as long as you can verify assets necessary to close i.e., a few months cushion (2-6 months PMI depending on lender). Verified assets can be any form of liquid funds including your pension, 401K or other investments. Jumbo loans are still very affordable. Given recent rate hikes it pays more and more to guard your credit!

Click this Credit Link to order your lender report and analysis on our secure site or call and we can review your report over the phone. Don't underestimate the importance of your FICO score!

Happy Fixin! Loannetter

copyright 2008 susan templeton